If aggregate planned expenditure exceeds GDP, then
A) firms' inventories are larger than planned.
B) the change in firms' inventories is the planned change.
C) firms' inventories are smaller than planned.
D) aggregate income is less than GDP.
E) firms' have no inventories.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds GDP, firms sell more than they planned, leading to a decrease in inventories, making them smaller than planned.

If Aggregate Planned Expenditure Exceeds GDP, Then